Ferrexpo plc ("Ferrexpo", the “Company” or the "Group") today issues its interim management statement in accordance with the UK Listing Authority's Disclosure and Transparency Rules.
Production
As announced on 10 April 2012, total pellet production from own ore in 1Q 2012 increased by 6.3% as compared to 1Q 2011. Premium 65% Fe pellet production from own ore increased by 1.7% in 1Q 2012 as compared to 4Q 2011. The mine continues to operate at full capacity.
Sales
Sales volumes for the three months to 31 March 2012 were 2.2 million tonnes, in line with the same period in 2011. The average realised price in 1Q 2012 was around 7% lower compared to the same period in 2011 reflecting customer mix and lower market prices. Ferrexpo continues to convert its contracts to index based pricing.
Costs
The Group’s C1 cash cost of production was $59.4, an increase of 17.2% compared to the average for 2011 full year. This has been driven by higher oil prices and local Producer Price Inflation. The Group continues to mitigate these increases through its business improvement programme and by increasing production from own ore. The Ukrainian Hryvnia, in which 70% of the Group’s total operating costs are denominated, remained stable against the US Dollar at around 8.0 UAH to 1 US$ during the period.
Capital Investment
Ferrexpo Yeristovo Mining (“FYM”)
First Ore (budgeted cost US$267 million):
The Group remains on schedule and budget to achieve first ore from the Yeristovo deposit by early 2013. To date some 32 million cubic metres of overburden has been removed.
Work continues with the local design institutes in relation to the concentrator, following which, and subject to market conditions, Board approval of the next stage of works at FYM is expected.
Ferrexpo Poltava Mining (“FPM”)
Capital investment at FPM has continued on plan to upgrade the production facilities to lift output of 12 million tonnes of pellets per annum from the beginning of 2014. This will be achieved initially by utilising ore from the Yeristovo mine.
Mine Life Extension Project (budgeted cost US$168 million)
This project is proceeding on schedule to extend the life of the FPM mine to 2038. As the project relates partly to overburden removal, it is expected that at current rates, the higher cost of diesel will increase the total cost of the project.
Quality Upgrade Project (budgeted cost US$212 million)
This project, to produce all 65% Fe pellets, is underway. The first shipment of eight (out of 10) vertimills, which are used to grind the ore finely in order to increase the iron ore content in the output, is in transit to the mine. The project is on schedule to be completed and fully commissioned by the end of 2014.
Funding
The Group has gross borrowing facilities of over US$1 billion with an average tenor of four years, providing it with sufficient financing to complete the core projects in its investment pipeline. Net debt as of 31 March 2012 was US$180.7 million, which predominately relates to recoverable VAT, of which approximately half is overdue. Repayments have been received in February, March and April and the Group continues to work constructively with local regional and central authorities to resolve this issue.
Michael Abrahams, Ferrexpo Chairman, commented:
“Production is up for the first quarter of this year as compared to 1Q 2011, a trend which is expected to continue as first ore from Ferrexpo Yeristovo Mining comes on stream in 2013. While costs remain under pressure, we continue to seek ways of mitigating these market driven price increases. The marketing team continues to make good progress expanding our global customer base.
“Ferrexpo continues to focus on its growth projects to increase annual production and the quality of its pellets. All of the projects underway are on schedule and it remains the Group’s intention to produce one million tonnes of pellets per month from 2014.”
Click here to read the full announcement on the Interim Management Statement (PDF 39KB)